The Indian and Pakistani prime ministers are due in Bhutan this week
India has arrested a woman working as a diplomat in its Islamabad embassy on charges of spying for Pakistan.
Madhuri Gupta, 53, is a second secretary in the high commission in the press and information section. She was arrested on a work trip to Delhi.
Officials say she is suspected of handing over classified documents to Pakistan's ISI intelligence service.
There was no immediate response from Pakistan. The neighbours have a history of mistrust and have fought three wars.
The arrest comes ahead of this week's regional summit in Bhutan, where Indian PM Manmohan Singh and Pakistani counterpart Yousuf Raza Gilani may meet on the sidelines.
Relations have been strained since the Mumbai (Bombay) attacks of November 2008, which India blamed on militants from Pakistan.
"We have reasons to believe an official in the Indian high commission in Pakistan has been passing information to Pakistani intelligence officials," said Vishnu Prakash, a spokesman for India's ministry of external affairs.
The Press Trust of India (PTI) news agency said Ms Gupta had been arrested four days ago after being summoned to Delhi.
She was produced in court on Monday and will remain in police custody for another five days, PTI said.
Ms Gupta has worked in Islamabad for three years, reports say.
The head of India's intelligence agency RAW (Research and Analysis Wing) in Islamabad is also being investigated, PTI reports.
The BBC's Sanjoy Majumder in Delhi says that although it is not clear what secrets were passed on, the revelations have come as a major embarrassment for India.
There have been instances of rogue agents or Indian officials working for foreign governments, but this is believed to be the first such instance involving Pakistan.
Ties between India and Pakistan are strained over the Mumbai attacks
This week in Bhutan, Mr Singh and Mr Gilani are expected to try to ease relations that have been strained since the Mumbai attacks.
India blamed Pakistan-based militant group Lashkar-e-Taiba for the attacks, which left 174 people dead, including nine gunmen.
Delhi put peace talks on hold suggesting that "state elements" in Pakistan were involved too. Pakistan admitted the attacks were partly planned on its soil, but denied any official involvement.
In February, Pakistan and India held their first formal talks since the 2008 attacks and agreed to "remain in touch".
And earlier in April, Mr Gilani and Mr Singh held "informal talks" at a reception hosted by US President Barack Obama.